Microsoft-Yahoo Deals 2008 & 2009, Side-By-Side

We’re about to do a call with Microsoft and Yahoo for more details about their proposed search deal. As part of that, I wanted to outline what we know so far and how that compares to the deal Microsoft made last year. At first glance, Microsoft is getting a huge bargain courtesy of the US Department Of Justice. Without Google being able to compete for Yahoo’s business, the billions that were floating around in 2008 become millions in 2009.

Note that we’ll be updating this chart throughout the day. For more background on the deal, also see our other articles today:

Microsoft is handling all self-serve sales; Yahoo sells to undefined “premium” advertisers for undefined period of time. Appears that advertisers of both types may have to buy ads at both Yahoo and Microsoft. Boosts Microsoft share if so. Microsoft hindered with direct relationship with key clients

Appears Yahoo would have continued keeping this; Microsoft itself doesn’t have a substantial program

Appears Yahoo may keep this

Domain / Direct Navigation Ads

Uncertain if Microsoft would have taken this over

Appears Yahoo may keep this

Market

Worldwide

Worldwide
(though uncertain about joint venture in Japan)

Term

At least 3 years

Yahoo gives up its search technology for 10 years; uncertain if it can use it again after that [and wouldn’t be that useful anyway]Microsoft pays Yahoo 88% of sales of search ads on Yahoo’s own sites [if I understand right] for 5 years

Microsoft guarantees revenue per search in each country for 1 1/2 years — what that revenue is hasn’t been clearly outlined.

Guarantees

In company memo, Microsoft said it would have guaranteed Yahoo would earn more than it currently makes, for 3 years.

Seems that Microsoft will now guarantee revenues for 1 1/2 years.

Poison Pill

If Microsoft did take over Yahoo, after 10 months, it could continue the agreement with no guarantees to Google and still avoid poison pill payment

Nothing specific outlined

Financial Upside

According to Microsoft, $1 billion per year in income above current levels

Yahoo says it will boost income by $500 million [per year, one time? not said] and save $200 million in capital expenditures [one time expense?] and boost cash flow annually by $275

Other
Upside

Yahoo would have no need to maintain engineering staff, infrastructure and protect against brain drain

Yahoo maintains control of a powerful search brand

Downside

Microsoft would compete with Yahoo in display area, yet Microsoft has strongly suggested search+display is a winning combination – so Yahoo would lose a key component other than “data” that would be given to them; search was main value (to me) of earlier deal at $40 billion, now only worth $9 billion?

Yahoo thought it has to own search tech back in 2004 to be successful as a search engine and a portal. So did Microsoft. Now Yahoo betting it won’t become like AOL